A Successful Example of South-South Cooperation

The 5th Ministerial Conference of the

Forum on China-Africa Cooperation was held on 19th July in 2012 in Beijing. Foreign ministers and ministers responsible for foreign economic cooperation from China and 50 African countries as well as President of the African Union Commission attended the meeting. This was another top-level China-Africa cooperation meeting since 2006 Beijing Summit， and also the first ministerial meeting in the second decade of the Forum. The meeting approved Beijing Declaration of the 5th Ministerial Conference of the Forum on China-Africa Cooperation (2013-2015)， which give comprehensive planning on ChinaAfrica cooperation for next three years.

It has been more than ten years since ChinaAfrica Cooperation Forum was held for the first meeting in 2000. And after more than one decades’ development， so now how is African foreign economy and how about the future of Sino-African bilateral trade·

1. Africa Foreign Economy

1.1. Brief description of Africa trade

Before 2000， African foreign trade kept up and down. From 1996 to 1999， Africa had a total foreign trade value fluctuating around 250 billion US dollars， including 110 billion US dollars of exports and 130 billion US dollars of imports.

Since 2000， Africa’s foreign trade embraces a rapid development. In 2011， Africa’s total foreign trade increased from 279.3 billion US dollars in 2000 to 1，164 billion US dollars， with export value up from 149.4 billion US dollars to 601.4 billion US dollars， and import value from 129.8 billion US dollars to 562.5 billion US dollars. In addition， in terms of trade balance， Africa has a trade surplus all the time except 2009.

Although global economy is still weak， Africa maintains a high speed economic growth， with 7 out of 10 fastest growing economies in the world from the Africa. According to the United Nations’ statistics for 2010， the fastest growing economies in Africa include Ethiopia， Seychelles， Zimbabwe， Congo and Ghana， and their GDP growth rates were 12.4%， 9.5%， 9.0%， 8.7% and 7.7% respectively.

1.2. The structure of Africa’s foreign trade

Due to historical reasons， Africa still has a low level of economic development and weak industry base， determining that African countries can only export products with less technical content. On the other hand， Africa has rich mineral resources. For example， Africa has an oil reserve accounting for 12% of global total reserves， gold and diamond reserves higher than any other regions， and rich copper， aluminum and other metal mineral resources. So， African exports mainly include fossil fuels and primary manufactured goods of raw materials， and import products mostly are mechanical， electronic and transportation goods.

Africa now has an export structure highly dependent on resources， with mineral products accounting for twothirds. If basic metals， pearls， precious metals， wood and soft commodities (for example， agricultural goods) are included， the ratio would rise to 90% or so. According to UN statistical data， in 2010， African fossil fuels and other exports had a total value of 276.834 billion US dollars， accounting for 56.20% of African exports; machinery and transportation equipments valued 155.564 billion US dollars， accounting for 31.63% of the total imports.

1.3. African investment attraction and foreign direct investment

On one hand， as Africa still has a low level of economic development， there are few local multinational companies， restricting Africa’s foreign investment. On the other， Africa has rich resources and great market potential， so it is attracting a lot of foreign multinational enterprises. Data shows that the African continent is the world’s largest undeveloped treasury of resources， including 10% of global oil reserves， 40% of gold and 95% of platinum metals， and more than 60% of developed and underdeveloped cultivated land in the world. Strong demand for oil and metals， minerals， food and other natural resources is driving foreign capital into Africa.

UN statistics shows that， from 2000 to 2010， foreign investment from Africa was relatively low， and it reached the peak of 10.719 billion US dollars in 2007; foreign investment in Africa as a whole grew rapidly， increasing from 10.967 billion US dollars in 2000 to 73.413 billion US dollars in 2008. Ever since， affected by the global financial crisis， foreign investment in Africa dropped， to 55.040 billion US dollars in 2010. In general， Africa is a net capital inflow country. According to 2012 World Investment Report by the United Nations Conference on Trade and Development (UNCTAD)， in 2011， foreign direct investment in sub- Saharan Africa surged by 25%. Among those countries， South Africa attracted more foreign investments.

2. Sino-African bilateral economic and trade development

2.1. Sino-African bilateral trade

In the first 30 years since 1950， Sino-African bilateral trade kept low speed growth， the next 20 years had a medium speed， and the recent 12 years witnessed a steady and high-speed growth. Since 2000， under the guide of China-Africa Cooperation Forum， Sino-African bilateral trade increases rapidly， up from 10.8 billion US dollars in 2000 to 124.158 billion US dollars in 2010， and China becomes the largest trade partner of Africa. Sino-African bilateral trade accounts for 10.67% of Africa’s total foreign trade and for 4.17% of China’s foreign trade (see table 1). In terms of trade balance， China gradually became a country with trade deficit.

In 2011， the debt crisis in Europe and America got worse， and global economic growth slowed down. Against the background of global economic downturn， Sino-African trade value made a new record of 160 billion US dollars， marking China-Africa trade and economic relation embraces a continuous and stable development.

2.2. Sino-African bilateral trade

In 1980s and 1990s， exports from China to Africa were mainly light industrial， food， chemical， livestock， agricultural products， etc. Entering the new century， mechanical equipment， automobile， electronic products and other mechanical and electrical products from China increased rapidly， and commodity quality and technical content improved with mechanical and electrical products accounting for more than 40% of total export value. In 2010， main exports from China to Africa were machinery(including transportation equipments) and manufactured goods of raw material， accounting for 45.44% and 27.54% respectively of total exports to Africa; imports from Africa were mostly mineral fuel (including lubricating oil and raw materials) and non-food raw materials， accounting for 65.08% and 18.15% of total imports from Africa.

In 2011， besides South Africa， top five African exporters to China (Angola， Congo-Brazzaville， Democratic Republic of Congo and Zambia) have a thin catalog. In addition to South Africa， the other four countries accounted for more than 60% of Africa’s exports to China last year， but for only 12% of overall production value in sub-Saharan African countries. Angola is an instructive example. It led Africa’s exports to China last year， and the export value achieved a new record of 25 billion US dollars， of which 99% from mineral fuel.

2.3. Sino-African bilateral direct investment

China-Africa cooperation on investment has become a new area of cooperation. In the new century， bilateral investment between China and Africa has good growth momentum. Although the scale and volume are not noticeable， bilateral investment is growing quickly. In 2010， 25% of the foreign direct investments in Africa are from developing countries represented by China， up from about 17.7% in 1999. In 2010， direct investment in Africa from China was 3.392 billion US dollars， and Africa’s investments in China totaled 1.28 billion US dollars， with a difference of 2.112 billion US dollars (see table 2). Statistics from China Ministry of Commerce show that， by the end of 2011， China’s direct investment stock in Africa has exceeded 14.7 billion US dollars， and more than 2，000 enterprises have invested and established in Africa.

Chinese investments in Africa feature wide coverage， including mining， finance， manufacturing， construction， tourism， agriculture and other industry; various investment methods， including single proprietorship， joint venture， joint stock， MA and joint resource development with a third country， etc.; diversified investors， including large and medium-sized state-owned enterprises， private enterprises and individual practitioners.

Data from Chinese Ministry of Commerce shows that: (1) the rank of African countries by Chinese foreign direct investments from high to low in 2010 were Democratic Republic of Congo， Algeria， Niger， Nigeria， Angola， Kenya， Zambia and Ghana; (2) Chinese investments in Africa covers various industries， including oil and railway in Angola， hydropower and shipping in Cameroon， construction and hydropower in CongoBrazzaville， metal resource development in Democratic Republic of Congo， aluminium， oil and shipping in Eqypt， metal resource development in Gabon， aluminium and electric power in Ghana， oil in Madagascar， real estate and hydropower in Mauritius， oil in Niger， iron mine in Sierra leone， hydropower， automobile， agriculture and oil in Sudan， metal， electric power and real estate in Zambia.

It is expected that China will continue to increase investments in Africa， especially in mining and energy， but today’s environment also gives China a stronger voice in the negotiation.

3. Analysis and methods to strengthen China-Africa bilateral economic and trade relationship

3.1. Give full play to China-Africa Cooperation Forum， strengthen the communication and cooperation with African countries

In Africa， China will not only face competition from western countries， but also more complex geopolitical forces， making economic activities politicized. In recent years， western countries smeared China with “new colonialism” and “China threat theory”， trying to block the further development of China-Africa cooperation. China should fully play the role in ChinaAfrica Cooperation Forum， strengthen communication and cooperation with African countries， therefore prove the longstanding stance of China.

3.2. Adjust trade structure， further strengthen trade relation with Africa

At present， many countries in Africa are lack of economic diversification， and can only produce industrial products with less technical content. But， as the economy grows， African countries will add imports of capital goods categories， begin to buy high-tech machinery， equipments and mechanical and electrical products， so as to adapt to the needs for industrialization. Therefore， China should adjust export structure according to the changes in African market， develop the potentials in high， middle and low-end market through market subdivision， and increase the exports of high value-added products with core technology and own brands， and actively improve trade structure to make service trade — the new growth point for China-Africa trade. Financial insurance institutions in China as well as shipping agencies should go to Africa， and actively develop local market.

3.3. Further increase investments in Africa， while prevent investment risks

Africa is rich in resources， energy and opportunities due to rapid economic growth， and all these would drive Chinese enterprises to further increase investments there. However， Chinese enterprises should also pay special attention to investment risks. For example， war， political instability， diplomatic ties， political environment， etc.， any of them can result in failure of investments， sometimes even cause threatens to personal safety. In February 2011， Libya civil war broke out， influencing 50 under-construction projects contracted by Chinese enterprises， involving a contract value of 18.8 billion US dollars.